Minimum Wage

Minimum Wage: Economists Agree World is a Complicated Place

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Forbes has an interesting article trying to sum up the state of the economists' empirical debate over the minimum wage and its effect on employment.

Some excerpts to get across the flavor of the conversation:

Pawe? Zdziarski (faxe), Astarot / Foter.com / CC BY-SA

David Neumark and co-authors have utilized a panel approach and found that minimum wages do lead to lower employment. Arin Dube and co-athors use an alternative approach that takes cross-state border counties as control groups and find there is no impact. They also find that including additional controls in the panel approach, like census region or state trends, makes Neumarks' results insignificant, allegedly due to pre-existing trends. Neumark replies that the cross border county grouping doesn't really lead to optimal control groups. The Dube approach, he alleges, really throws out too much identifying information, and the resulting large standard errors don't give you a precisely estimated zero impact, but a very noisy estimate….

So this is where you are left off. Who has constructed the more reliable counterfactual? Should you specify state time trends and if so how? Does Dube throw out too much useful data? And if so, how does Dube et al identify the impact on separations and hires?…..

Then came Meer and West (2013). This paper extended Dube's focus on labor market flows and looked at net job creation using the cross-state border counties approach. Much has been discussed about their findings, but I think an important missing contribution of their paper is an explanation for why there would be so much disagreement about the impact of minimum wages if there really was a negative impact. What they show is that if the true effect of the minimum wage was to reduce the growth rate of employment, then looking at the impact in levels would give you two different estimates of the effect: no effect if you included a growth trend, and a negative effect if you didn't include a control trend.

The article does what it sets out to do fairly well, but it is curious that it never discusses economic theory or why this question is so controversial, and why studies that seem to show no employment effect of a minimum wage might seem curious and worthy of being looked at very carefully.

Science tends to progress not merely by observing the world in an empirical sense, but by trying to abstract out regularities or laws that operate in it. This is, as the language from Forbes above makes abundantly clear, because the world is a crazily complicated multicausal place. Understanding the whys of what you are observing is very difficult if all you do is observe, or observe combined with lots of complicated mathematical attempts to figure out how to account for all the other things that might be going on. Because, as the ongoing debate described above shows, you can never do that in a way that will satisfy all other reasoning and observing minds.

Upon observing an airplane fly, one doesn't assume that apparently the law of gravity doesn't apply to metal plane-shaped things. Rather, you intelligently realize instead that other forces must be in operation on the plane. Similarly, we should not assume that just because one doesn't always see an observable, countable diminution in people employed related to the minimum wage in every specialized situation an academic looks for it, that on the margins the law of supply and demand don't work on labor and that raising the minimum wage is costless in terms of jobs.

If you believe that some people's marginal product isn't worth more than that minimum wage, and if you believe employers would tend (other things being equal) to not want to lose money on hiring people, then you should understand that the minimum wage does cost jobs. How many, and whether you think the benefit to the seen still employed should as a matter of policy outweigh the harm to the unseen unemployed, are different questions.

People involved in the actual science mostly get these distinctions. But that these sort of studies regarding the minimum wage sink into that general background scientistic morass of what the "educated, I read the Sunday New York Times with some attention" believe and "know" about the world is unfortunate, because it privileges some very picayune and minor attempts to look at a portion of the world above the more valuable process of actually understanding on a deep level how the world works.

In short, it allows minor-level smarty pants to confidently "know" that we can raise the minimum wage without causing anyone to lose or not get a job, to let this sort of "sophisticated, empirical" stuff obscure a well-understood fact among economists: you can raise a legal wage above the level at which many people will be employed. Anyone contemplating policy needs to know that. 

Previous blogging by me on the minimum wage here and here.

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123 responses to “Minimum Wage: Economists Agree World is a Complicated Place

  1. …an important missing contribution of their paper is an explanation for why there would be so much disagreement about the impact of minimum wages if there really was a negative impact.

    Some economists are aiming for a specific conclusion?

    1. And I thought judges were bad about reasoning from a preordained conclusion!

  2. The rate of employment is only part of the debate. I don’t see where the qualitative aspects of minimum wage laws are being addressed.

    I don’t expect to see respect for human agency appreciated in an empirical study, but I qualitatively prefer a world where people are free to make choices for themselves–even if they’re employers.

    Also, the nature of the unemployed doesn’t seem to be discussed, only the rate of employment, but it’s a qualitatively different world when higher pay draws suburban white kids into the job market–at the expense of poorly educated adults, people with criminal records, minorities, et. al.

    1. This is a great point that isn’t addressed when you only look at ‘total employment’ or some other aggregation.

      For example, when a neighborhood becomes ‘gentrified’ you can say now the people in the neighborhood are better off. But they aren’t the same people.

      1. I think someone made a point on a prior discussion about minimum wage to the effect of that they were a local business in an upscale community who hired primarily teenagers from poorer neighborhoods – until minimum wage increased enough that the local teenagers thought it was worth their while.

        So in that case – employment didn’t really drop, but it did change the makeup of the employees.

        & as usual – it hurt those the law was meant to help.

  3. Dude, data trumps assumptions, even if those assumptions are based in a cherished theory. Just maybe modern economics is right, and “other forces must be in operation” in a complex economy in which the commodity ‘labor’ happens to consist of people who also spend money in the same economy in which they work.

    1. Listening to Tony talk about economics is like listening to dogs bark to music.

      http://www.youtube.com/watch?v=3XfJ5zksF4M

      1. So it must be especially painful for you to be such a comparative expert while still being wrong about everything.

    2. //in a complex economy in which the commodity ‘labor’ happens to consist of people who also spend money in the same economy in which they work.

      THIS, though I’m loathe to positively cite Tony.

      And anyway, Tony, this isn’t anything we don’t know, that’s what macroeconomics is. However, the original theory still applies, and the only thing is question is the suply curve. And even Keynesian economics doesn’t justify your party’s insane spennding of non-existant money. From what I read, Keynes only recommended one-time borrowed-money spending on specific, productive infratsructure, not endless debt spending on stupid useless bullshit (green economy, and all the other stupid TARP bullshit – here in Bergen County, in Oradell, I know that they added a small median with the red grit topping to kinderkamack rd., useful, I’ll grant, but hardly actually PRODUCTIVE)

      1. My party is not the one that engages more in insane deficit spending, and that’s just the facts (though, as with MW, it doesn’t fit orthodoxy). And since we’ve been on a mild austerity path for years now despite there never really having been a sufficient countercyclical response to the great recession, the facts on the ground seem to go with the Keynesians any way you slice it.

        1. “Mild austerity path for years”

          HAHAHAHAHAHAHAHAHAHAHAHAHAHAHHAHAHAHAHAHA

          Holy shit, that is the funniest thing I have ever seen you type.

          Thanks for making me laugh at the end of a long work day.

          1. Why don’t you check your facts before you hurt yourself.

            1. http://www.whitehouse.gov/omb/budget/historicals

              Look at the first spreadsheet. Federal Outlays have increased every year since pretty much forever. The only year where there was any kind of clawback was 2012 outlays. (And after suggesting the damn “sequester cuts” Obama fought vehemently against them, but go ahead and say that was because of him.)

              So no, we haven’t been on a mild austerity path for years. And since most of the sequester cuts were killed with the budget deal, we aren’t planning austerity for the future either.

              1. If, in your mind, a 20% increase is required yet there’s only a 10% increase, you might consider 5% “mild”.

                1. Yeah well I don’t think arbitrary numbers with no context are worth pissing one’s panties over. If we actually, really cut, sure it would still qualify as austerity policy, just worse.

                  1. ARF!ARF!ARF!

        2. //My party is not the one that engages more in insane deficit spending, and that’s just the facts

          You’re kidding, right?

          The military, at most, is our big spending, but you guys have no end to what fucking absurd things you want to subsidize. I heard some guy on TV once saying grocery sgtores need to be subsidized in the inner city for peoples health. Jesus tapdancing Christ.

          Even if we raised taxes, you guys would just spend more of that money on various welfare and bullshit problems.

          Here’s a little test. I have written on this little card concessions I’m willing to make on the budget (both spending and taxes), but before you even SEE the card, you tell me, what concessions are you willing to make? And we’re talking to make us solvent long-term. If you don’t reach my expected minimum proposals on you’re part, you’re a joke.

          1. *you’re a joke and not serious about lowering the deficit and making America solvent long term

            1. Whenever you tell someone of Tony’s ilk that Social Security along with Medicare/Medicaid future unfunded liabilities equals the world’s wealth, they say that all we have to do cut defense significantly and tax the rich…a lot.

              I stop arguing after hearing this statement.

              1. //Social Security along with Medicare/Medicaid future unfunded liabilities equals the world’s wealth

                Really? Got a cite for this? I’d love this factoid

              2. You’re just wrong on Social Security, and the whole point of healthcare reform is to do something about underlying healthcare costs driving a large part of government spending–but even the modest, market-based reform we tried was viciously opposed as evil.

                Besides, what’s there to argue when your implicit solution is to throw old people into poverty en masse?

                1. Ummmmm, no one argued that old people should be thrown into poverty. Never said that one time. It’s must be pretty hot in your neck of the woods because you are burning strawmen like crazy.

                  1. We’re libertarians Ed, of course we want old people thrown into poverty. Hell, we want the old and poor to die in the streets like dogs.

                    Didn’t you learn about this in our handbook, Atlas Shrugged?

                  2. So once we get rid of SS and Medicare, how do you propose to prevent it?

                    1. //So once we get rid of SS and Medicare, how do you propose to prevent it?

                      What are you , serious?
                      There’s little evidence it’s ever been a real problem.

                      It doesn’t take a genius to save money, and/or invest in something that’s actually productive, not speculative.
                      And it wouldn’t be hard to afford medical care once you psycho regulators get your grubby hands off medical care. Hey, you know how France’s wonderful medical system works? Subsidies, yes, but no regulations and no retarded malpractice liability. It’s been admitted even here on Reason that France’s medical system is better.

                    2. So it’s unicorns then. Somehow, unique among the societies of all of history, poverty just naturally doesn’t exist in this country. Well aren’t we special.

                    3. You’re a fucking joke, and YOU believe in unicorns

                      Saving for retirement is no serious problem . I mean, WHat the hell are you even talking about? Are you saying, there are going to be scores of fuck ups who couldnt save for retirement? Please.
                      Nobody’s denying that there may be SOME fuckups, but that’s life.

                      You’re imagining problems that don’t exist. Not all poverty can or should be expected to be able to be solved

                    4. Hey I make good money and am surely more responsible than average when it comes to managing it, and I’m not even sure I’m going to be able to retire at the lifestyle to which I’m accustomed.

                      Yes, assuming that everyone will save (even if they can’t afford to) while also assuming that everyone will be able to exactly predict their lifespans–is fucking obviously unicorns.

                    5. And when social security goes bankrupt, and there are no more outlays to the elderly, won’t millions of elderly be impoverished?

                    6. That only needs to happen if we don’t alter fiscal policy.

                      You want to kill social security so those are obviously crocodile tears.

                    7. Edwin,

                      Because you can’t prove that NOBODY will be harmed by your proposals, they are invalid. So sayeth Tony’s handler!

                    8. So, Tony, how do you propose to prevent transferring money from poor, young people to rich, old people? You do understand that’s exactly what the current system does today, don’t you? Unicorns!!!!!

          2. So my party is worse on deficit spending because of… a couple of anecdotes and assumptions about the future you just pulled from your ass? I’m just saying, Republicans spend more and tax less, and that, again, is just the facts. You can look it up.

            Despite my people being the more fiscally responsible option, I’m not convinced of the dire necessity of being solvent–certainly not during a weak economy, though paying down bills in a strong economy is Keynesian and probably a good idea. Of course I’d slash military spending by a lot and raise taxes by a lot. I did this internet calculator thing and managed to balance the budget without sacrificing any of my priorities.

            1. Tony, you gotta be fucking kidding me

              Social Security is bound to go bankrupt, and Medicaire and medicaid are equally fucked. When you take the unfunded liabilities, it’s fucking endless amounts of money. At least the military is always just the military, it isn’t inherently bound to grow hugely becuase it isn’t a bunch of promises.

              Again, you guys aren’t serious, see my index card example.
              I KNOW you want to raise taxes and cut military spending, but what are you willing to give to the other side if you want that? Can we slowly phase out social security? Can we make the whole healthcare thing state-level (which could obviously turn out to be multi-state level as states could work together)?

              1. If you subject all income (including capital gains) to FICA withholding would make SS solvent in perpetuity even at higher benefits. SS is easily solved. The problem with Medicare/aid is underlying healthcare costs (the highest in the world since we never socialized), and those costs don’t go away if you make old people start paying out of pocket. That’s certainly a more complex problem but is one of the primary reasons behind healthcare reform, the project more opposed than any other by conservatives and libertarians in recent years.

                1. In Tony’s world a 100% tax results in 100% of proceeds to the government and NO reduction in output. It’s rich that he accuses us of believing in unicorns.

                  SS reform increased withholding in the 80’s. Even with that and accepting the fiction of the trust fund, SS goes bankrupt in 2033. What makes you think that simply raising taxes won’t result in exactly the same situation in a few decades time? Oh, right: unicorns.

                2. Oh, and we did socialize health care. It’s called Medicare and Medicaid. Care to guess when US health care costs started to take off? What’s worse is that your precious Medicaid not only costs more but it provides substandard care. In some cases you’re actually better off WITHOUT health insurance than with Medicaid. And how does BarryCare expand coverage? That’s right: Medicaid. You’re not just stupid, you actively hate poor Americans.

                  1. Healthcare costs are paid by people, whether it’s via taxes or out of pocket. They won’t go away as a share of GDP if government stops paying them.

                    Since the socialized programs you mention cost people less than the private market does, clearly the way to save money is to socialize the private market.

              2. At least the military is always just the military, it isn’t inherently bound to grow hugely becuase it isn’t a bunch of promises.

                I don’t know if I’d say that. It’s basically a bunch of promises to certain contractors. And lets not forget the promises the VA makes.

            2. We have always ripped on the GOP and how they are just as bad as the Democrats when it comes to spending. There are a crap ton of articles in Reason that rips the GOP apart concerning spending. In case you have forgotten, this is a Libertarian magazine where we equally tear the two parties apart.

              No wonder people hate you on this site. You create these strawmen about Libertarians in your mind and argue on bad faith while pushing the goal posts.

              1. Well you shouldn’t tear them equally on deficit spending, since Republicans are demonstrably worse. But you kinda like those tax cuts for the rich that cause it all, don’t you?

                1. Oh , is THAT your argument? That Republicans spend more compared to the budgets they pass via tax changes? Please

                  You guys want to suck up all the money in the world and give it away to “the poor” just so you can emotionally masturbate each other. Social security and medicaire ARE BANKRUPT. What don’t you get about this?

                  A giant fucking game of emotional ookie cookie. Bet that turns you on there, doesn’t it, Tony?

                  1. This country cannot go bankrupt. Secondly, see above on Social Security. It can easily be made solvent forever if you are really interested in that.

                2. To Tony:

                  Never said that I wanted tax cuts for the rich. I think everyone taxes should be made lower while we should be cutting waste from all areas of government.

                  But yeah, I love the rich and hate the poor.

                3. But you kinda like those tax cuts for the rich that cause it all, don’t you?

                  No, I hate the profligate spending of other peoples’ money that causes it all.

              2. in my opinion, at least military spending is actually something, that is the military, especially in a world where we’re in danger. Whereas all these welfare programs solve problems that never existed, and only real “exist” because of their system as a whole, and are DOOMED to bankruptcy, and won’t pay Jack to the average Schmoe

                but yeah, I’d at least be willing to part with that, if Tony’s side would make some concessions

                1. which I shouldn’t have said, since that’s part of my index card experiment

                  But there’s still more Id be willing to give up, I’m just curious if Tony can at least make a SERIOUS PRELIMINARY proposal to open up negotiations

                  1. How is cutting military spending a concession on your part? That’s clearly where most of the bloat is by anyone’s estimation who’s not a neocon.

                2. That’s just a pile of crazy double standards. The mere threat of invasion by a foreign power, which will probably never happen, is worth spending billions or trillions on, but poverty among the elderly is a phantom problem?

                  1. Damn Tony, you are just burning strawman after strawman today. You have so far accused us of wanted to give the rich tax cuts, make the poor pooer, and fuck the old over. Even though we never explicitly state those as our goals. You suck when it comes to actually arguing the case, so thus you create strawmen and hurl out insults.

                    Give this some applause.

                    1. I’m sorry, I realize that in your heart your actual policy goal isn’t to screw everyone but the wealthy over and force them into a quasi-feudal state of perpetual misery, but that is what would obviously happen if you got your way on fiscal matters. If I don’t get an intermediate step between cause and effect where I get to introduce unicorns into the equation, I don’t think you should either.

                    2. If I don’t get an intermediate step between cause and effect where I get to introduce unicorns into the equation, I don’t think you should either.

                      And yet, that’s exactly what argument by assertion is.

                  2. So you’re not willing to part with Social Security? Then YOU AREN’T SERIOUS, and you’re the bigger spender. Have you seen the fucking graph of the fucking liabilities of social fucking security, the projected was like a slope of fucking 7, and the actual is alredy like a slope of 8, it’s fucking nuts

                    You’re clearly not serious about the budget and making America solvent. We’ll be in Japan’s situation within 40 years, and the American government will go bankrupt within my lifetime, if we take your advice

                    Not to mention nobody my age will get their social security

                  3. So you’re not willing to part with Social Security? Then YOU AREN’T SERIOUS, and you’re the bigger spender. Have you seen the fucking graph of the fucking liabilities of social fucking security, the projected was like a slope of fucking 7, and the actual is alredy like a slope of 8, it’s fucking nuts

                    You’re clearly not serious about the budget and making America solvent. We’ll be in Japan’s situation within 40 years, and the American government will go bankrupt within my lifetime, if we take your advice

                    Not to mention nobody my age will get their social security

                    1. America can’t go bankrupt and the SS math has already been done. Subject all income, including capital gains, to FICA withholding and SS is solved for the foreseeable future even at higher benefits. Sorry it’s so simple–it’s almost as if you’re ideologically opposed to the idea and it wouldn’t matter what its budget looked like.

                    2. //America can’t go bankrupt

                      You’re out of your fucking mind

                      //it’s so simple

                      You’re out of your fucking mind

                      // Subject all income, including capital gains, to FICA withholding

                      Wait, I had to actually double take that. Are you seriously suggesting a 100% tax? You know that’d lead to anarchy, right?

                    3. Sorry there are two aspects to this: lifting the cap on withholding (all income above $106,800 isn’t taxed for SS purposes), and also subjecting capital gains income to the SS tax. That solves the problem. Nobody said 100% tax.

                    4. You;re still out of your fucking mind if you think Social Security is no big pickle

                      I mean, what do guys like you think, that there are like secretly bajillions of monopoly-guy-loking dudes you just happen to never meet, secretly tap dancing with their canes and tophats and monocles, eating nothing but caviar and truffles?

                      What was the current debt altogether, $500,000 PER PERSON!? That’s an amount of money THAT DOESN’T EXIST, PERIOD, no matter how much you raise taxes

                    5. Tony’s solution is mathematically correct because it assumes that the rich will only recover a tiny portion of their contributions in s.s. benefits compared to the larger (but still negative) portion they get today. The problem is that his solution is morally indefensible.

                    6. //Tony’s solution is mathematically correct because it assumes that the rich will only recover a tiny portion of their contributions in s.s. benefits compared to the larger (but still negative) portion they get today

                      No, it’s still wrong on this part. There aren’t actually that many rich people around, and the unfunded liabilities are predicted to be huge, and our predictions have so far been repeatedly UNDER the mark

                    7. The problem is that his solution is morally indefensible.

                      The last refuge of the holy and wrong. I said we could raise benefits for everyone. My plan increases payouts. Who loses again? Making the tax more progressive doesn’t split any moral foundations. It is not moral to tax up to $106,800 and immoral to go above that. The rich do have less need for SS, but this is capitalism right? They might actually need it some day. You guys are so incredibly, hypocritically classist. SS is a national safety net. It’s not a personal savings account. The only thing that is changed by paying for them more progressively is that we can afford it better.

                  4. Yes the military should be cut, but you’re delusional if you think that the entitlement state isn’t the problem. Mandatory spending, essentially your precious welfare state, consumes all or nearly all federal tax revenue. Think about that for a minute. Not just income tax. Not just social insurance taxes. Not just excise taxes. ALL federal taxes. Medicaid, socialized medicine, provides terrible care and costs $500BB a year. That program alone spends close to what our entire military budget does. And you think military spending is the heart of the problem?

                    And this doesn’t even touch on the fact that much of the spending on the military (and the majority of the cost growth over the last decade) goes to personnel. Don’t you want to pay our servicemen and women who sacrifice for this country? Don’t you want to take care of our wounded veterans? Damn but you’re heartless. Populism and guilt-tripping is a bitch.

                    1. No I want to stop paying soldiers and start paying to get them civilian jobs and education. The more soldiers we have, the more of their extra special safety net we have to pay for. Why would you be guilt-tripping me when you clearly believe that national service doesn’t entitle one to government benefits. You can’t. That’s sentimentalism.

        3. You lost me at “my party”. Makes it hard to take you as a serious person.

          1. You weren’t at “my party” this weekend.

      2. “From what I read, Keynes only recommended one-time borrowed-money spending on specific, productive infratsructure, not endless debt spending on stupid useless bullshit”

        You mean during the depression when the liquidity trap was a huge problem?

        Did the last recession happen because consumer spending dried because of a liquidity trap?

        No.

        The last recession was about credit drying up.

        Are we in recession now?

        Even if you bought Keynes’ diagnosis for what to do about the liquidity trap, why would we want to do that now?

        And what the hell does any of that have to do with the minimum wage? Is someone suggesting that the inefficient use of labor–by causing consumers and entrepreneurs to overcompensate labor–is going to accomplish economic growth somehow?

        If you want to put more discretionary dollars in the hands of consumers and entrepreneurs, I can think of a better way to accomplish that than the inefficient use of labor.

        1. //And what the hell does any of that have to do with the minimum wage?

          it doesn’t, sorry, my point is that Tony is still and idiot even if he may be right on one tiny point

    3. Dude, data trumps assumptions

      The data is not on your side.

      1. The other day I made the exact same argument being offered by Forbes and Reason right here, so apparently it is.

        1. Ah, so that’s how you handwave away the dozens of studies that line up with economic theory.

          1. Did you rtfa? Is that what Reason is doing too? I said nothing definitive could be claimed, and that this probably indicated that any effect was minimal. Isn’t that what’s going on here?

            1. You might want to actually read the last paragraph.

              1. The one where he continues to refuse to admit that his orthodoxy doesn’t seem to be borne out by facts?

                1. Data doesn’t trump the idea that an increase in minimum wage affects jobs – that’s a lie. The data shows, in very specific cases, that raising the minimum wage had little impact.

                  But it’s not just theory that an increase to minimum wage must have an impact on jobs – as it’s the same exact thing as taxing income and we know – increasing taxes on anything, reduces the use of that thing.

                  To believe otherwise is to believe smoking taxes don’t affect how much or whether people smoke.

                  1. Granted so sometimes it’s innocuous to reduce the use of the income of the very rich, or at least a good tradeoff for what it pays for.

                    1. Granted so sometimes it’s innocuous to reduce the use of the income of the very rich, or at least a good tradeoff for what it pays for.

                      Surely if it’s so innocuous, then the people being stolen from won’t object to parting with their money freely, and so there’s no need to force them, right?

    4. So Galileo was wrong to side with Copernicus over Brahe? Because Brahe’s system, while wrong, still accounted for stars and planetary movement better?

    5. Data does trump assumptions which is why Keynesianism was disproved in the 70’s. You see, it’s simply impossible to have stagflation. It is not allowed in the Keynesian models. Oops. So that leaves us with Neo-Keynesianism and the mythical multiplier, except, like God, the only way to prove the multiplier exists is to start with the assumption that it does. How fitting that an economic philisophy which invokes “animal spirits” has become such a religion.

      Seriously, go read the Broken Window fallacy. Even you will be able to follow the logic. And if you manage that, then go read the Meeks paper which shows that increasing the minimum wage results in slower employment growth in precisely the groups you claim to want to help. Normally one could chalk that up to simple ignorance or stupidity, but your kind have continued it so long and so stridently that it’s obviously just pure malice.

    6. No, the obvious answer is staring them in the face.

      Minimum wage laws create a price floor. If the clearing price for labor is above that floor then the minimum wage will absolutely no effect.

      A minimium wage of $.01 per hour would have no effect on employment. Increasing that minimum wage 10,000% to $1.00 /hr would likewise have no effect on employment. At which point the pseudo-economist of the left would claim that fact pattern proves that minimum wage laws per se do not effect employment.

      In the US somewhere around 1% of employees make the minimum wage – which stronly implies that it is in fact near the market clearing price for unskilled labor anyway.

    7. data trumps assumptions, even if those assumptions are based in a cherished theory.

      The irony here is that it’s Tony that’s are ignoring the data. Meer-West uses Dube’s method of evaluation and actually explores the second order effects; their conclusion bears out the theory to a T (something he’d realize if he bothered to read either the paper or the article).

      The results for job creation show that, in equilibrium, any supply-side effects on search (and the potential increase in the quality of employer-employee matches) do not overcome the negative demand-side effects of higher labor costs. The lack of strong effects on job destruction is in line with the literature on the fixed costs of labor and firing aversion. More importantly, we find that on net the minimum wage meaningfully affects employment via a reduction in the rate of long run job growth.

      In the long run, [less educated and experienced] workers face substantially longer periods of unemployment or delays in hiring, thus bearing more of the cost from minimum wages. This phenomenon is particularly important given the evidence that minimum wage jobs often result in relatively rapid transitions to higher-paying jobs.

  4. I get the theory, but the positive-slope supply curve assumption is probably faulty for a lot of low-end jobs nowadays. I fail to see how the marginal production per worker lowers for jobs like fast food workers. I buy it for factory jobs with high specialization (each guy runs one specific machine), but not for other stuff. It’s probably a mixed bag

    1. “I fail to see how the marginal production per worker lowers for jobs like fast food workers.”

      Care to elaborate?

      1. Yeah, like I said,
        like, I get it if’s a 50’s job at a factory where this guy works the pipe bender and that guy speed wrenches in the bolts

        But like fast food? Where every guy can do every job, and each store can definitely sufficiently serve the community all the time? Each guy’s productivity would seem to me to be exacly the same, and more based on their personality. The number of people you hire would e directly related to demand

        Ditto hand-processing factories. Like meat-packing factories and other food-related facilities, where each worker just does shit by hand as fast as he/she can. Want to output more pork bellies? Just hire more guys to cut the skin off.

        I dunno, I’m not saying that the minimum wage doesn’t reduce jobs anywhere, it obviously does, but it may not in some types of jobs.

        Though now that I say it like that, I guess the argument cold be made that that’s still a loss on net. But the other side of that is that more money for a lot of people would also help the eocnomy.

        I’m ambivalent.

        Anyway, our labor problems can only be solved by ending the college cartel and similarly changing the culture (OMG, you mean that college DOESN’T teach any skills, and I have to actually TRAIN people!? DERP!!!!)

        1. I think it’s the other way around.

          I think that the more featureless someone’s labor skills are, the more sensitive the demand is to price.

          When you look at minimum wage jobs, they’re paying the minimum wage because their products are competing primarily on price. Buying a cheeseburger from McDonalds is a lot less expensive than buying the ingredients in a grocery store and making it yourself at home.

          I’m also thinking about the fact that when I lived in Mexico, all the fast food restaurants delivered. ALL of them, McDonalds, Burger King, KFC–they all had an army of guys on mopeds who rode around doing deliveries. One of the great things about living in Mexico is that you can get anything delivered. Everybody does home delivery!

          And the reason is because labor in Mexico is so cheap, that you can deliver and still be cost competitive. If labor were cheap enough here in the U.S., there would be a ton of delivery jobs available here, too.

          So, I think you’re getting it backwards. The number of people demanded as low skilled workers–especially in the service sector–would be much higher if the cost of employing them were much lower.

          1. I suspect it’s more to do with cultural differences and the overall legal environment.

            I can’t imagine ever wanting fast food delivered, then again, I’m on the road all day long and think fast food is crap that suffices when I don’t have time for anything else.

        2. It’s also possible that the minimum wage has never been increased too much above market clearing rate for labor.

          I knew a fuck ton of people that were already making $7.25-$8 an hour before the last minimum wage hike. So those businesses weren’t necessarily negatively affected. If it had been raised to $15 though? You would have seen a lot of unemployed shift workers.

          1. That was the case for me when I worked at Borders Books. By the time they raised minimum wage, I was still making a dollar more.

        3. The number of people you hire would e directly related to demand

          Huh? At some wage level, it becomes more expensive to hire Bob to flip burgers than it does to buy a machine to replace him or just do without him.

        4. The number of people you hire would e directly related to demand.

          Demand is also directly related to the cost you charge for the service.

  5. Apparently the world is so complicated we can’t get alt-text 😛

  6. How about we get rid of this “employment-at-will” bullshit, actually make everyone at contract, like how property and personal rights actually dictate, and employers would stop siphoning our lives away and have realistic expectations of what they could produce with their employees’ time, and how big their margins should be?
    Hell, let’s face it, the only reason management makes more money is people are instinctively heirarchichal and too stupid to realize it. Management almost by definition is actually LESS competent

    1. How about we not outlaw freedom of association?

      1. Racist.

      2. it isn’t freedom of association

        employers make contracts and then frequently flaunt them and demand more hours of labor or more work in the same amount of time than actually constitutes “working”, but people just acept it because they think they’re covered by overtime laws,

        but it fucks the whole system, changes the discipline that would be put on employers if they had to be held to their contracts

        1. it isn’t freedom of association

          “Hey Bob, I’ll pay you to come fill out spreadsheets for my business. You can quit anytime you want, and I can fire you anytime I want.”

          You want to outlaw that.

          1. no,

            the employer usually claims hours that they then violate, having already created expectations on your part. Overtime laws placate the masses but actually allow employers to demand endless hours, and they just fire anyone who asks for their due overtime pay. There are endless numbers of employees in small firms who are subject to this because of the lack of eyes seeing it.

            I don’t buy it. Our whole understanding/regulation of employment is fucked, and contrary to REAL enforcements of REAL contracts

          2. It would be nice if employers weren’t able to have you work 60 hours a week without paying you overtime or bonuses. But at-will shouldn’t be illegal.

            1. // at-will shouldn’t be illegal.

              But it almost always comes with claimed hours, which immediately creates a form of contract

              If it’s at-will, it has to be made sure it’s at-will. This mixed shit fucks people over.

              1. I’m always amused by the dipshits in this world who have had a bad employment experience because they are 1) a shitty, low-value worker, 2) foolishly picked a terrible place to work, 3) think somehow that hasn’t happened to everyone at one time or another, and 4) want to change simple freedom of association work situations because of their one or two shitty experiences (if you have had more than that, the problem is almost assuredly you).

                You don’t like it? Be more valuable, choose your workplace more intelligently, realize we all have to suck it up sometimes, and stop fucking whining.

                1. dude, it’s a contractual issue.
                  Employers everywhere ask for way more than they claim they will at first.

                  Aren’t libertarians for the enforcement of contracts? You just like to turn a blind eye because you’re USED to the system, or you’re in a safer place of enmployment and you want all your goods and services to be cheap

                  1. Employers everywhere ask for way more than they claim they will at first.

                    O Rly? Because I’ve pretty much been exactly right about how much work an employer will ask for with all the jobs I’ve taken.

                    Sounds like you just really, really suck at divining what an employer will ask for. That’s your fucking problem. When I encounter an employer who I can smell is going to ask for way more work, I walk away (unless that’s OK with me, like in the case of startups).

                    1. //That’s your fucking problem

                      It isn’t if they say one thing then do another

                      What part of contract don’t you guys understand?

                      Letting people get fucked over != enforcing contracts.

                      Gerstanlicht?

                    2. So you failed to make sure that the employment contract specifies that the employer cannot ask for more work and then fire you if you do not increase your workload beyond the initial contract. Sounds like you fucked up, brah.

                    3. Sounds like he owes his employer money for teaching a valuable lesson.

                    4. I JUST said that the entire employment system works this way, via “employment at will” (a logical impossibility by the REAL nature of employment and what’s said between the parties) and overtime laws

                      it’s a situation that can’t be avoided by the vast majority of people, because it’s entrenched in law (both fiat and judicial law/precedent)

                    5. Your argument boils down to, employers said they would do things that they did not end up doing. What you have failed to demonstrate is how that is in any way actionable.

                      While you cannot indenture yourself in an employer’s service, you can still write up a contract stipulating minimum hours and compensation rates. What you can’t do is force your employer to sign it, which is what it sounds like you want to be able to do.

                      At-will employment is a contract framework in which you are paid for the time you work, and the arrangement may be terminated by either party at any time.

                      If your employer makes additional promises beyond those, then you must establish some way in which his failure to fulfill them has harmed you in a way that being unemployed would not.

                2. Or fucking quit.

  7. How about *maximum prices* instead of minimum wages? Nobody could object to *that*!

  8. God, my brain hurts. My soul hurts. Why must the Tonys exist?

  9. you can raise a legal wage above the level at which many people will be employed.

    Worst way to make this point ever!!!

  10. The whole point is that one shouldn’t rely on the government to continue to up the minimum wage so that person is living up to the same standards as one who has acquired a skill set. That’s what Rubio just suggested–we should subsidize–more entitlement to those less successful. The last job I had at minimum wage was at eighteen.

    I’ve heard this rant before. What we owe. When I came out of the military in 1994 with nothing but a duffle bag and a motorcycle I got a broken down efficiency. I rented a movie called “Reality Bites.” The twenty something Generation X. College grads who sat in their communal apartment of woe because they had to work retail for low pay. That was about the synopsis of the film.
    Generation X is now in their forties. And it is the same creaky ferris wheel of rotating whine. Can I ask for someone who has been on unemployment for a year why at that point you didn’t think about getting another trade? If worst came to worse you could get a CDL.
    If we continue this mentality we will fall as a nation. The dollars aren’t there anymore. And that is the concept of self-reliance. And if your reliance is constant increases by the government on minimum wage then your wrong. You lose self reliance and my fiction becomes reality as we will soon land on the shores of Marxism. And that shoreline is already in sight.

    Charles Hurst. Author of THE SECOND FALL. An offbeat story of Armageddon. And creator of THE RUNNINGWOLF EZINE.

    1. If we continue this mentality we will fall as a nation.

      If we fall as a nation, will it be the first fall, or the second fall? I don’t have a duffel bag (named after the town of Duffel, in northern Belgium) or a motorcycle, but I’d like to know. Will we fall from a creaky ferris wheel, or will we fall onto the shores of Marxism? Or will we fall from a creaky ferris wheel onto the shores of Marxism?

  11. “Studies” that show minimum wages have no economic impact are bullshit. There is no getting around the fact that, with very few exceptions, raising the cost of a commodity causes people to try to consume less of it. There are zero reasons to believe labor is one of those rare exceptions, and plenty to believe it’s not.

    The studies that Tony and other economic illiterates like to cite are equivalent to studying the effect of cargo weight on car mileage by interviewing a bunch of drivers, studying gas stations receipts, and correlating all that with EPA records of the mileage of various car models. “What is the make and model of your car? How many people usually ride in your car? What’s the weight of the objects in your trunk?” I could produce a bunch of numbers purporting to prove that the load carried by a car has no discernible effect on mileage, but it’d all be bullshit, because we know that adding weight to a car will reduce its mileage. Period. End of story.

    1. There is no getting around the fact that, with very few exceptions, raising the cost of a commodity causes people to try to consume less of it. There are zero reasons to believe labor is one of those rare exceptions, and plenty to believe it’s not.

      Well said, though I might modify it to say:

      There is no getting around the fact that, with no exceptions…

      Because where exceptions exist, it’s because the studies which show an increase in price doesn’t result in lower demand is against specific products – ubiquitous products almost everyone needs/uses daily and against specific increases – usually very mild ones.

      So sure – you barely tax food a little more than you used to and food is already much cheaper historically than it has been, demand likely doesn’t move that much.

      Same with gas, cigs, cell phone bills, etc, etc, etc.

      Additionally, all businesses are always looking for more efficient ways to produce or sell any given product – so it’s possible, say if we’re talking about taxes on internet connections, that the taxes are largely missed by the American public because there is so much competition to deliver faster speeds at lower prices in the first place.

      However – tax anything with a fairly stable price base enough and the axiom – tax something and get less of it, will become evident quickly.

      Aside from that pedantic point though – still well said.

      1. Yes, the exceptions I was thinking of are specific products like status/luxury goods (e.g. raising the price of a designer purse might actually increase sales) and things like specialized newsletters (raising the price might increase perceived value and thus increase sales).

  12. These people really have no idea whats going on over there.

    http://www.Anon-Global.tk

    1. Over where? And what have you done with LardoSardo? He was a better anonbot than you’ll ever be.

  13. More emphasis needs to be placed on Bastiat’s lesson of “That Which is Seen, and That Which is Not Seen” and the resulting inability to preform utility comparisons. The positive consequence of increasing people’s purchasing power is visible and concentrated; whereas, the negative consequences concern the diffuse effects on individual’s decisions at the margin which are locked up in people’s heads, may cause inaction, and do not only involve employment. The entire notion that you can perform a valid utility comparison regarding the effects of relatively small changes to the minimum wage using employment data is asinine. If classical liberals entertain this utilitarian argument they will lose.

    1. There is no reason to be shy of measurement even while acknowledging the limitation. With the multiplier, Robert Higgs showed the way. You start from the base line of 1. Any effect of the monies spent related to the ‘seen’ effect you measure as a positive. Any externality or cost related to the same spending, the ‘unseen’ you measure as a negative. His study of the Great Depression, and that of Amity Shlaes, shows that theory behind that of the positive multiplier is bunk. Where Keynes made the case that traditional economic theory is a special condition (hence the title ‘General Theory –‘) where production and employment are at their optimum level the opportunity costs involved apply in the conventional sense, but in a recession, those conditions no longer exist and fiscal policy goosing the economy will retain a net positive in productivity.

      This is a fundamental calculus error of where the origin point applies. As applied to the optimum condition that no longer exist, you are counting that against productivity. If you set the origin point where it belongs, right square on the day you are measuring for productivity and employment, then the nature of opportunity cost have not changed at all.

      1. How does this address the inability to measure the unseen negative consequences in a way that makes them seem comparable to the very visible increase in wages for low wage workers? You don’t actually think that saying that the nature of opportunity cost has not changed is at all persuasive to the Keynesians, do you?

        Keep in mind that humans are fundamentally emotional creatures. Preferences and behaviors are the result of how the brain has been structured by genetics and the environment to produce emotional responses in regard to a given stimuli. If you think the response to an opportunity cost argument or a small increase in UE will outweigh that due to the increase in wages for low wage workers, you will be pursuing an argument destined to lose amongst the general population.

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